These are obviously tough times for share investors. The stock market crash of recent weeks threatens to flare up again at any minute. For long-term investors though, this sharp selloff represents a chance to buy some shares which have been painfully oversold.
Our job here at The Motley Fool is to help you separate the wheat from the chaff and avoid possible investment traps. Take The Restaurant Group (LSE: RTN) as an example. This is a share which, following recent heavy weakness, now trades on a price-to-earnings (P/E) ratio of 1.6 times for 2020. It carries a monster 14.7% dividend yield too.
Forget City expectations of an 8% earnings rise this year though. The Restaurant Group is one of those big-yielding investor pitfalls. It’s long been plagued by intense competition in the mid-tier dining sector. But following the coronavirus outbreak, conditions have become even more perilous for the Frankie & Benny’s owner.
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On Wednesday, it advised like-for-like sales had tanked 12.5% in the preceding fortnight. It also warned corresponding full-year revenues could plummet 25% due to the outbreak. Things could be even worse should the UK government ramp up quarantine measures and force restaurants across the land to temporarily shut.
In my opinion, The Restaurant Group is therefore a share to avoid at all costs.
A better buy?
Those seeking big dividend yields in the current climate would instead be better served by buying Highland Gold Mining (LSE: HGM).
You might consider this a questionable selection right now. Safe-haven gold, after all, has sunk along riskier assets like shares. It’s my belief though the price picture remains quite bright for the shiny asset. And latest World Gold Council comments underline why.
The body comments that while “the deceleration in economic growth will impact gold consumer demand and gold’s volatility may remain high,” it adds that “high risk levels combined with widespread negative real rates and quantitative easing will be supportive of gold investment demand as a safe haven.”
9%+ dividend yields
As I said, gold’s been under pressure of late. It’s a result of intense trader-selling to meet margin calls. A stronger US dollar has also hit yellow metal demand in recent days. Like other commodities, gold is priced in the greenback. This makes purchases more expensive when the North American currency rises. Consequently, bullion values have slipped back under $1,500 per ounce.
The price outlook for the medium-to-long-term remains compelling though, as macroeconomic uncertainty persists and global central banks keep cutting rates.
The Bank of England added to concerns over rising inflation by cutting its benchmark rate to a fresh record low of 0.1% on Thursday. Once market jitters quieten down, I fully expect metal prices to march back towards recent multi-year highs.
And Highland Gold Mining’s brilliant value makes it a great way to play this scenario. As well as sporting a rock-bottom forward P/E multiple of 5.2 times, it carries a gigantic 9.2% dividend yield for 2020 too.
